The rise of ‘transient’ customers is a core factor behind the decline of the ‘goodwill’ value SME businesses have traditionally enjoyed, raising expectations of far-reaching consequences for owners when it comes time to sell.
“The failure by many SMEs to rise to the challenge of the transient customer is the exact reason why Amazon is killing shopping malls,” says business consulting and advisory firm, Darren Pratley & Associates.
Pratley is warning that while modern technology has helped create the agile customer of 2018 – customers that are better informed, more mobile and less loyal – it should not be used as a reason for failing to build meaningful, long-term relationships with customers.
“Consumers today are less engaged and not as loyal to companies and brands as they were five years ago. A quick search will net a wide choice of suppliers and competitive prices, and of course, they can shift the buying decision almost instantly.
“One of the foundations behind the sale value of a company – particularly for SMEs – has always been the firm’s loyal customer base. But when transactions per customer fall, and they are plummeting, and fewer people than ever are opening your newsletters, you may find the sale price of your business falling in line with engagement levels,” Pratley said.
On the face of it, many businesses may not have noticed much change in their sales numbers or revenue because new customers are always filling the empty spaces. The only problem is that these are transient customers, here today, gone tomorrow.
“Transient customers have very little personal knowledge or affinity with your company or brand. They may simply have made the decision to go with you, not on the basis of a recommendation or because you’re proven, but simply because you appeared in the top three results of their Internet search,” Pratley said.
“We see this in industries such as real estate. Whereas a few years ago most vendors would pick up the phone and call the person they last sold or purchased a home, where most of the customers are less than a year old,, that’s not happening anymore.”
Traditional drivers behind how people select who to buy from, like referrals, testimonials and ‘get-to-know-you meetings are no longer considered important.
“The lack of a relationship between a company and its customers, and any meaningful attempts to develop a relationship, results in customers getting a poor experience. In effect, companies are pushing their customers further and further away from them.”
Pratley said that now, more than ever, is when SMEs should put more time and effort into getting to understand customer needs, as well as investing in developing stronger customer relationships.
Today’s companies – retail brands, services industry and even fast-moving consumer goods – all have to work a lot harder at the customer relationship. Investing time and money in constant visibility is essential.
“The more transactional business environment we are living in does also present opportunities. Technology, for example point-of-sale (POS) software like Vend and customer relationship tools likes Salesforce, can track and record customer data, behaviour and problems at the point of sale.
“Use the data to begin building more personal interactions based on point of sale conversations and purchase histories,” Pratley said.
He offers the following four tips for maintaining the value of your company in the age of the transient customer:
1. Create a programme to bring your customer to you.
Work at understanding your customer and why they need your service or products. These kinds of clues will, for example, let you know what type of car they might buy next time around and, importantly, when.
2. Make sure your database is two, three or five years old and up-to-date.
Databases, where most of the customers are less than a year old, will hold less value.
3. Go beyond ‘window dressing’ – the polite smile and ‘thank you’ – and use data to develop deeper insights of your customer.
Point of sale technology is ideal for capturing important customer details at that pivotal moment when everybody is getting what they want.
4. Build a profile based on your key clients.
Use your customer profiles to research the depth and duration of the relationship your customers have with your business e.g. when last you spoke and what they asked questions about.
“Every three years for the last decade I have purchased a laptop from the same retail outlet. Despite that, I have never once had a phone call or email reminding me that I may be due for a new laptop and what models may suite my needs (based on previous history).
“The Business environment is changing so fast, but most SMEs are still too lazy to care about what they are doing and how they treat their customer. It’s no wonder that businesses like Amazon, which put a lot of work into understanding customer needs, are cleaning up when it comes to market domination,” said Pratley.
Regardless of age, stage, size or industry, from time to time, a business really needs to bring in a specialist who can challenge the business. By creating an environment to review its performance and test its core, Darren Pratley & Associates can challenge the status quo and consider change.
Darren Pratley & Associates brings a unique set of skills and opportunity for any business owner or leader to build a personalised review process that will create a great outcome.
The firm works with clients to uncover your industry’s hidden gems, explore new options, develop smart plans and then support the set-up of mechanisms to deliver them.
Darren Pratley & Associates
Telephone: +64 21 1225354